Ooooo, terrible things can happen. The latest, as you can hear in radio commercials and other places, is that bad niks can rob your house from under your feet. But you can buy insurance against such a fate. Phew. But maybe it’s also a bullet. Rick Kahler, President of Kahler Financial Group in Rapid City, SD, explains:
Larry Lumière: So tell us about this serious problem.
Rick Kahler: I’ve only heard of this frantic radio commercial rom warning that your house may be stolen from you. They claim that thieves can take your property and then mortgage it or even sell it without your knowledge. In fact, they may have already done so. You may have lost all of the equity in your home. You will discover fraud when you are evicted by a foreclosure or a new owner.
Of course, after all these alarms, the ads offer a solution: take out their title theft insurance. They promise to protect your title, monitor it 24/7 and alert you when a fraudulent title transfer is filed. A business charges $ 79 per year for $ 1,000,000 of title theft insurance. It is very unlikely that such a company will ever pay for insurance.
Light: How to come?
Kahler: The claims are so exaggerated that these companies either fail to understand the law or intentionally distort the facts. Like most things, there is some truth to these outlandish claims. It is true that anyone can forge your name on any document, including an act purporting to transfer title to the forger. Such a deed could be filed with the county deeds register.
Light: It sounds worrying.
Kahler: This does not mean that someone has stolen your title. First, a counterfeit act is invalid and does not convey anything. Only you can legally transfer your title to a third party. If a buyer or lender relies on a forgery and doesn’t do due diligence on title to a property, they’re out of luck. They, and not the rightful owner, will ultimately lose the money paid to the thief.
Second, a potential forger could easily obtain a blank deed form online and fill out the legal description of your property obtained from the public records. However, the signature must be certified by a notary public, who is required by law to verify your identity.
Third, it is virtually impossible for the thief to mortgage or sell the property to a knowledgeable lender or buyer. Lenders, securities companies and real estate companies have so many collateral in place that there is almost no chance that a fraudulent transfer will not be discovered. Required credit reports, employment and income checks, tax returns, appraisals, and title insurance are all bound to alert you and the lender that something is wrong.
Light: But there are cash transactions in real estate.
Kahler: Even with a cash buyer, a thief’s chances of success are low. Only the most naive buyer will fail to obtain title insurance. Title insurance protects buyers against title defects, including liens, fraud and forgery. It will alert the buyer or lender of any default before closing. If a securities company misses a default, it must pay for any damage. No legitimate lawyer or real estate agency will allow you to buy a property without this insurance.
If a buyer is naive enough to buy a property without a legitimate appraisal or title insurance, they could be duped. If they show up in your driveway with a moving van, they’re the ones, not you, who are at risk of losing their money.
Light: And such movements are against the law.
Kahler: Counterfeiting is a crime in all fifty states, punishable by jail time and heavy fines. The court may also require restitution for damages caused by the infringement, such as the cost of clearing the title.
In the extremely unlikely event that someone goes out of their way and risks committing all of these crimes, the cost of title clearing is the greatest risk to an owner. This will require the assistance of a lawyer. Wouldn’t that potential expense be worth considering purchasing title theft insurance? Perhaps, assuming the policy covers these expenses. Unfortunately, none do.